Monthly Market Update — September 2021

Key Points

  • About Those Rate Cuts At this time last month, traders were betting (via Fed Funds futures trading) that there was an 80% chance the Federal Reserve would cut their short-term discount rate at the March policy meeting. But on February 2, the Labor Department reported a much stronger number of nonfarm payrolls added to the U.S. economy than expected. As a result, the odds are more than 80% that the Fed will NOT cut rates in March.
  • About That Mortgage Rate As the Fed dismissed a March rate cut, the markets re-priced rates in accordance with the Fed’s return to the higher-for-longer mantra. As a result, the 30-year fixed mortgage rate shot back above 7% for the first time since early December.
  • The Ultimate Election Year 2024 is not just an election year; it may be the election year. National elections are scheduled or expected in at least 64 countries, as well as the European Union, which all together represent almost half the global population.  
  • Diverging Markets The world’s two biggest economies have seen very divergent stock markets. China, the world’s second-largest economy behind the U.S., has seen its stock market sink to five-year lows while the U.S. stock market has raced to all-time highs.
  • Missed It by That Much The Eurozone is one of the three largest economic blocs in the world, along with the U.S. and China. In the fourth quarter of 2023, its economy stagnated, but the Eurozone escaped a technical recession (two consecutive negative quarters of growth). Still, the Eurozone’s average GDP growth over the last five quarters has been flat as a pancake at 0.0%.
  • About This Coming Month February has typically shown weakness for U.S. stocks, particularly during election years. Analysis by S&P shows that for the month of February, the S&P 500 Index has historically posted positive returns 52.6% of the time, with the second lowest average monthly return of -0.11%.

Market Summary

Asset Class Total Returns

[Market Update] - Asset Class Total Returns Jan 2024 | The Retirement Planning Group

Source: Bloomberg, as of January 31, 2024. Performance figures are index total returns: US Bonds (Barclays US Aggregate Bond TR), US High Yield (Barclays US HY 2% Issuer-Capped TR), International Bonds (Barclays Global Aggregate ex USD TR), Large Caps (S&P 500 TR), Small Caps (Russell 2000 TR), Developed Markets (MSCI EAFE NR USD), Emerging Markets (MSCI EM NR USD), Real Estate (FTSE NAREIT All Equity REITS TR).

After the S&P 500 Index failed to achieve a new all-time high in 2023—the first time since 2012 that the S&P didn’t hit an all-time high during the calendar year—it made up for the wait by setting six new record highs in January (plus a couple more in the early days of February before this went to publication). However, it wasn’t a smooth trip to the record books. The first three days of January were down days for stocks and put the S&P 500 in the hole for the first week of the year—the first negative week since late October, breaking a nine-week win streak. A couple of things made investors reassess their optimistic outlook for rate cuts in 2024, which helped fuel the profit-taking. First, midweek, the Federal Reserve (the Fed) released the minutes from their December 12-13 FOMC policy decision meeting, and it showed that officials still hadn’t ruled out further rate hikes, although almost all of the top officials are expecting some easing in 2024. Overall, Fed officials stressed the need to move carefully as their forecasts were associated with an “unusually elevated degree of uncertainty.” The minutes also showed that “several” officials said that the Fed might have to hold its benchmark rate steady “for longer than they currently anticipated,” while “a number” of officials pushed for some easing. The second incident came at the end of the week with the government’s Employment Situation report for December, which showed much stronger job creation than anticipated.

Those two themes came back into play in the first week of February, but for the rest of January, they took a backseat, and the market got right back to its winning ways. The S&P finished higher each of the final three weeks of January, setting the first new record high on January 19 and making five more additional all-time highs on the way to a +1.7% total return for the month (with dividends included). That put the S&P 500 up +15.5% since October 31—its largest three-month gain since June 2020.

As was the case for much of 2023, the rally in January was narrow, primarily limited to a handful of mega-cap technology-oriented stocks. The so-called “Magnificent Seven” stocks (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) that were responsible for the vast majority of the market’s advance in 2023 also drove the Lion’s share of gains in January. Actually, two of the Mag 7 may have dropped out of the gang. Apple ended the month down -4.2%, and Tesla dropped -24.6%, making it the worst single stock in the S&P 500 for January. The remaining five made up about 75% of the S&P 500’s positive January return.

Also consistent with 2023 was the notably poor performance of the smallest U.S. stocks. The Russell 2000 Index, which had just rallied more than +12% in December, fell -3.9% in January. It was the only major US index to decline in January. It only managed one positive week in January, underscoring how poor the market’s breadth has been lately. Historically, that has made it more challenging for the market to sustain its advance. Investors will want to see the small caps begin to participate in the upside as we progress through the year.

Like small caps, non-U.S. stocks also were challenged in January. Developed market international stocks (as measured by the MSCI EAFE Index) inched up +0.5%. Japan’s stock market was up nearly 8% for the month, and Europe added about +2%, but the United Kingdom fell -1.3%. The MSCI Emerging Markets Index was down -4.7% as China’s CSI 300 Index dropped -6.3%. The challenges in China are discussed in more detail down below under the “Diverging Markets” header.

Bond prices fell throughout most of January. Healthy economic data added confidence to market hopes for a ‘soft landing,’ but it also made expectations for rate cuts in March less likely. The 10-year U.S. Treasury yield rose +3 basis points to close the month at 3.91%, its first monthly increase since October. With yields up a bit, the Bloomberg U.S. Aggregate Bond Index slipped -0.3% in January. Like their stock counterparts, non-U.S. bonds (the Bloomberg Global Aggregate ex U.S. Bond Index) struggled more, falling -2.3%. The U.S. dollar was up nearly +2% in January, providing a headwind for overseas assets.

Further below, in the “About This Coming Month” section, there’s a discussion about February seasonality and its tendency to be a weak month for stocks. Indeed, the S&P 500 has been negative in four of the past six Februarys. That, combined with the recent all-time highs, can sometimes make investors nervous. It’s important to note the seasonality is helpful to examine for the purpose of setting expectations but is not meant to be any kind of market timing trigger. Even being the second weakest month, on average, over the long term, the average decline was merely -0.1%, and it is still positive the majority of the time, about 53% of the time since 1920. That actually goes up to about 59% positive hit rate from 1990 on (up in 20 of 34 years). In regard to investing at all-time highs, all-time highs tend to come in bunches. We are already seeing that this year, with eight new all-time highs and flirting with a ninth as we go to publication here. How does the S&P 500 perform following an all-time high? Historically, when the S&P 500 is near an all-time high, studies1 show returns over the next year are similar to those when the S&P 500 is more than -5% away from an all-time high. The average annualized return over the next three years when investing near an all-time high was actually slightly higher than the average annualized return when further away from an all-time high. The bottom line is, for long-term investors, both seasonality and investing at all-time highs are mostly background noise and merely of interest for setting short-term expectations.

[Market Update] - Market Snapshot Jan 2024 | The Retirement Planning Group

Source: Bloomberg. Data as of January 31, 2024.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Quick Takes


Good news for American workers has been bad news for investors hoping that the Federal Reserve would begin cutting interest rates as soon as the Federal Reserve’s March meeting. The unexpectedly strong January employment report the morning of February 2, combined with multiple recent economic releases showing a resurgence in inflationary pressures, has resulted in rapidly declining odds that Fed will deliver the first rate cut in March. As shown in the chart below, the odds for a March rate cut had declined to 22% on Friday, February 2, following the strong jobs report (it actually fell further, below 15%, on Monday February 5). That is quite a reduction from the 33% odds just prior to the Friday jobs report and far below the strong consensus (nearly 80%) this time last month. To be sure, the overwhelming majority of traders still expect rates to be lower by May, but with the Fed no longer expected to start cutting in March, the number of total rate cuts expected in 2024 have also fallen. Investors now see rates ending 2024 year in a target range of 4% to 4.25%, equivalent to one fewer quarter-point reduction than before Friday’s job data. That implies a total of five cuts this year, down from the previously 6-7 expected.

Traders Kiss March Rate-Cut Odds Goodbye

Odds that the Fed cuts rates in March have nearly disappeared

[Market Update] - Traders Kiss March Rate Cut Odds Goodbye Jan 2024 | The Retirement Planning Group

Note: Probability derived from fed-funds futures contracts.
Source: CME Group, The Wall Street Journal. As of February 2, 2024.


On Monday, February 5, the average rate on the 30-year fixed mortgage surged back above 7.0% after the Fed dismissed a March rate cut. Mortgage rates jumped +15 basis points on the day and are now at their highest level since December. The Monday move came after the 30-year mortgage rate made its sharpest jump in more than a year Friday after the January employment report showed much higher than expected job growth. Rates then moved even higher Monday after the monthly ISM manufacturing report came in high as well. The rate rise comes as the median US home is now selling for $418,000, up about +35% since 2020, making housing affordability a much bigger challenge for many Americans.

Mortgage Rates Jump Back Above 7%

Mortgage Rates Have Been on a Wild Ride Since the Summer

[Market Update] - Mortgage Rates Jump Back Above Jan 2024 | The Retirement Planning Group

Source: Mortgage News Daily, CNBC.


For the first time in history, nearly half the global population will be subject to national elections in the country they reside, across at least 64 countries, as well as the European Union. And many of the elections may prove to be consequential for years to come. Of course, the U.S. national elections in November have all three branches of government up for grabs. Overseas, the elections intersect with big geopolitical situations like the Presidential election in Taiwan that could shape China’s approach to invade or not. On the contrary, some election outcomes will have little uncertainty, but the sheer number of countries holding elections and the vast economic activity and impact in all those countries has the potential to add an extra level of crosscurrents and volatility to global markets in 2024.

Not Just an Election Year, 2024 Is the Election Year

More than six dozen countries around the world will hold elections in 2024

[Market Update] - Not Just An Election Year Jan 2024 | The Retirement Planning Group

Source: TIME.


The world’s two biggest economies have had widely divergent stock markets of late. China, the world’s second-largest economy behind the U.S., has seen its stock market sink to five-year lows while the U.S. stock market has raced to all-time highs. Besides slowing economic growth, the property market is in shambles. Construction accounts for as much as a quarter of China’s Gross Domestic Product (GDP), and the latest crisis involves the country’s, and the world’s, largest property developer, China Evergrande, has been ordered to liquidate by a Hong Kong court. Evergrande, with more than $300 billion in liabilities, has been a slow-moving train wreck. It first defaulted in 2021, and court hearings, restructuring talks, and hopes of government bailouts have dragged on since until the Hong Kong judge ruled “time to say enough is enough” in the liquidation order. Japan spent several decades repairing household and corporate balance sheets after its debt bubble burst, and one has to wonder if China will spend the next few decades repairing their financial standing. The property-sectors problems have dented consumer confidence in China and resulted in the country’s GDP slowing to +5.2%, which is one of the lowest levels in decades.

Two Largest Economies, Two Different Stock Markets

Stocks in the U.S. and China are on very different paths

[Market Update] - Two Largest Economies Jan 2024 | The Retirement Planning Group

Source: Bloomberg.


The Eurozone is one of the three largest economic blocs in the world, along with the U.S. and China, and its economy stagnated in the fourth quarter of 2023. The Eurozone escaped a technical recession, which is typically defined as two successive quarters of negative GDP growth. Economists polled by Reuters expected a recession after Q3 GDP fell -0.1%, but Q4 GDP ended up flat from the prior quarter. That was a far cry from the U.S.’s +3.3% Q4 GDP growth and left the Eurozone’s average GDP growth over the last five quarters at 0.0%. It’s not a recession, but not much to boast about.

Eurozone Narrowly Avoided Recession

Eurozone Gross Domestic Product (GDP) Growth (%, Quarter-over-Quarter)

[Market Update] - Eurozone Narrowly Avoided Recession Jan 2024 | The Retirement Planning Group

Source: True Insights.


Seasonality can be helpful to set expectations for the stock market, but of course, past performance doesn’t guarantee future results. With that said, historically, February has typically shown weakness for U.S. stocks, particularly during election years. Analysis by S&P shows that for the month of February, the S&P 500 Index has historically posted positive returns 52.6% of time. When the returns were positive, the average gain was +2.88%. But in the negative February months, the average decline was -3.44%. As a result, for all monthly February returns since 1920, the overall average return was a decline of -0.11%. The only worse average return is September, which has had an average monthly decline of -1.16%. May was the only other month with an average decline, but it is just barely negative. All other calendar months have average monthly gains of +0.5% or better.

February Has Typically Been Weak for U.S. Stocks

Average S&P 500 Returns by Month (since 1920)

[Market Update] - February Has Typically Been Weak for US Stocks Jan 2024 | The Retirement Planning Group

Source: Charles Schwab, Bloomberg, S&P, Carson Investment Research.

Asset Class Performance

The Importance of Diversification. Diversification mitigates the risk of relying on any single investment. It offers many long-term benefits, such as lowering portfolio volatility, improving risk-adjusted returns, and helping investments to compound more effectively.

[Market Update] - Asset Class Performance Jan 2024 | The Retirement Planning Group

Source: Bloomberg.
Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by: 30% US Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4% Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.

* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

1 Nick Maggiulli, Should You Buy An All-Time High?, Of Dollars And Data.

Chris Bouffard is CIO of The Retirement Planning Group (TRPG), a Registered Investment Adviser. He has oversight of investments for the advisory services offered through TRPG.

Disclaimer: Information provided is for educational purposes only and does not constitute investment, legal or tax advice. All examples are hypothetical and for illustrative purposes only. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed. Please contact TRPG for more complete information based on your personal circumstances and to obtain personal individual investment advice.